The postings of a customs lawyer in Chicago on the state of customs law and international trade law. Important Disclaimer: None of this is legal advice, don't act on it. Don't ascribe these statements to my law firm, its partners or clients. Don't steal from my blog. I wrote it, I own it. But, feel free to link to me. Also, under the rules regulating speech by attorneys, this blog may be construed as lawyer advertising. I am the sole party responsible for the content.

Monday, October 27, 2014

In 1989, with torches and pitchforks, Congress chased the Tariff Schedule of the United States away from our black and white villages, never to be seen again. Where did it go? What happened to its arcane rules like "chief use" and the "more than doctrine?" Unfortunately, we now know. Dispatches from the Court of Appeals for the Federal Circuit show that its unmarked grave is empty. Shuffling marks in the dirt lead to the Courthouse where the Federal Circuit has taken up and decided Victoria's Secret Direct, LLC v. United States.

This may be the final edition of a horror tale subtitled, "Rise of the TSUS." I have two prior postings on this case here and here. Sadly, the photo of the fit model used as demonstrative evidence has been removed. You should go back and read those posts.

The terrifying issue here is the correct tariff classification of knit tops for women that provide both body coverage and bust support, eliminating the need for a brassier. In the trade, these are know as "shelf bra camisoles."

The innocent and unsuspecting star of this tale is the importer, who wants them classified in Heading 6212 as brassieres and similar articles. The government has given up it initial position that the articles are t-shirts or tank tops of Heading 6109. Rather, it is arguing that the Court of International Trade's decision classifying these garments in the residual provision if Heading 6114 is correct.

This is where things get scary. Through incantations and divination, the majority of the Federal Circuit found that the garments have two distinct functions: providing support as a bra and providing coverage as a top. The issue comes down to whether garments with those two functions, that can be worn in public without layering on top, are brassiers, girdles, corsets, braces, suspenders, gaters or similar articles.

When faced with this kind of question, courts traditionally unleash their minions (i.e., law clerks) to employ a rule of statutory constructions called ejusdem generis, which sounds best when said with the Hungarian-inflected voice of Bella Lugosi. Under this rule, when a general term (here "similar articles") follows a list of specific examples, "similar articles" must share the unifying characteristic of the listed items. According to the Court of Appeals, this is a "common sense" assessment of the listed items. It is not intended to be an exercise of abstract logic or semantics.

Here, the Court found the unifying characteristic to be support of either the body (e.g., brassieres) or other garments (e.g., suspenders). Each, in their own way, help overcome the burden of gravity, if you know what I mean. And, that function is not diluted by the additional function of providing body coverage. Backless evening gowns, for example, apparently provide built-in support but are not considered to be support garments of Heading 6212.

Based on this, the Court found that the two garments at issue, while providing bust support, do not share the unifying characteristic of having support as the primary functionality. Rather, the garment is wearable in public without additional lawyers. That cannot be said about brassieres and suspenders, at least not in my neighborhood.

But, there was one more voice to be heard: Judge Reyna with another strong dissent. He sets the tone with the following opening:

The majority reaches its decision by rewriting the fundamental principles of a long established doctrine of statutory construction and by invoking an approach for classification of articles that this court soundly overruled. The majority’s analysis invokes a "sounds right to me" approach that is decidedly at odds with established rules of tariff classification interpretation established by law and followed by this court. For this and other reasons set forth below, I respectfully dissent.

Essentially, he is pointing the hubris of someone tinkering with forces they may not fully understand or be able to control. Lighting must have flashed about the Courthouse while the majority raised a multivolume document cobbled together of parts of various editions of the dead and discarded TSUS to the rooftop in an effort to cheat Congress.

According to the killjoy dissent, everyone agrees that the unifying characteristic of the items in Heading 6212 is that they provide support to a body part (or two) or to some other garment. The Court of International Trade found that the essential feature of the imported garments is to provide support. Judge Reyna would have found that conclusion of law (i.e., the unifying characteristic) and finding of fact (i.e., that the garments provide support) sufficient to find them classifiable as similar articles in Heading 6212, despite additional coverage and warmth functions.

Shouting "It's alive," the dissent accuses the majority of re-animating the discarded "more than doctrine" under which an article was excluded from a heading if it included non-subordinate features beyond those encompassed by the heading. [I noted this as an issue as far back as 2011 in this post.] In this case, the Court used the non-subordinate feature of serving as a top to overcome the similarity to bras. This is despite the "more than doctrine" supposed to have died with the TSUS in 1989.

Moreover, the Court--again according to the dissent--muddied the dark and turbulent waters further by inserting into the ejusdem generis analysis the notion of "paramount function" instead of "essential characteristic." By doing this, the Court requires that various characteristics be weighed in an effort to determine which is paramount. By doing so, the Court's analysis is inconsistent with prior case law on ejusdem generis.

You may be wondering, What about the evening gown? No problem for the dissent. To classify the evening gown as similar to a brassier or girdle, the Court would have to find that support is a core and indispensable element of the gown and that it does not have a more specific primary purpose. Apparently, he would find that coverage and adornment were the more specific primary purpose.

All of that, left the judge in the dissent roaming the halls with a rhetorical pitchfork and wooden stake (to mix my literary allusions).

Personally, I am not sure the evening gown issue is so easily dismissed. The analysis would be that the hypothetical dress performs a support function as an indispensable element of its design and use. That means it is prima facie classifiable in 6212 as a support garment. OK, but that does not take it out of whatever heading applies to evening gowns. That's probably Heading 6104. But that only gets you so far. Assuming both Headings are prima facie applicable, the next question is whether one provides a more specific description than the other. An argument can be made that a garment that provides support has specific requirements that are more difficult to satisfy than the reasonably generic designation of dress or top. In that case, the more specific description might be Heading 6212, which would be a win for Victoria.

But, I have done zero research on that analysis. There may be legal notes or other reasons it is wrong. It's not like a mistake in analysis can have a bad result, is it . . . .

Monday, October 20, 2014

The Jones Act is an aspect of customs law we don't often cover. It is, however, disproportionately represented in the rulings Customs and Border Protection issues. It is, therefore, worth a brief look.

The part of the Jones Act with which we are concerned regulates coastwise transport and is 46 U.S.C. § 55103. Under the law, to be a coastwise-qualified vessel, the ship must have been made at a U.S. shipyard, documented in the U.S., and owned by a citizen of the U.S. Only coastwise-qualified vessel can carry passengers or cargo from one U.S. port to another. A non-coastwise-qualified vessel may not transport passengers or cargo from one U.S. port to another U.S. port without risking a $300 penalty. Many ships are documented in Panama, the Bahamas, and other countries where the fees and regulations are favorable. This is why cruises departing the U.S. return to the port of departure.

Customs is often asked whether a person who happens to be on a ship is considered a passenger for purposes of the Jones Act. That is what happened in HQ H258132 (Oct. 15, 2014). A passenger is anyone on board who is not connected to the operation of the vessel.

In this case, someone was on board the M/V Seabourn Quest to install a new satellite antenna. Customs has held repeatedly that workmen [sic] and technicians are not passengers if their activities on board the vessel contribute to the operation, navigation, or business of the vessel. Installing a satellite antenna is directly connected to the operation of the vessel and, therefore, the technician is not a passenger.

Done and done.

Now for you ship nerd, the M/V Seabourn Quest was built in Italy and is documented in the Bahamas. It is a cruise ship capable of carrying 450 passengers with a crew of 335. Here is a nice shot from "The Cruise People."

If you are interested in the economics of the Jones Act, check out this episode of NPR's Planet Money.

Monday, October 13, 2014

This really more of a case review than a ruling in that it comes from the Canadian International Trade Tribunal, which is not Canada Border Services Agency and is clearly not U.S. Customs and Border Protection. But, it is an interesting issue and Canadian customs law has a slightly exotic air about it. So, here we go, eh.

There are a growing number of coffee artisans and coffee snobs. I find myself among the latter as I make excellent but highly inefficient cups of coffee in my AeroPress contraption. I also spend too much time and money at Intelligensia Millennium Park where I occasionally purchase an individually prepared, single cup filtered, lovingly agitated, and perfectly heated cup of exotic coffee. It is delivered with a small carafe of the remainder for your refill. On the espresso side, the macchiato is a work of art and perfectly paired with a glass of sparkling water. If it is morning, the buckwheat scone is a delightful addition. But, I digress and leave myself open to well earned ridicule.

The legal question here is whether espresso machines that grind beans and pump hot steam are coffee makers for purposes of tariff classification. That raises the difficult question of whether espresso is coffee, which was apparently a matter of much debate in the CITT.

The case is Philips Electronics v. President of the CBSA. The classification issue is whether an espresso machine should be classified as a coffee maker under HS Heading 8516.71.10 or as an other electro-mechanical domestic appliance of 8509.80.90. The product is the Talea Giro Plus, which is a pretty impressive looking machine.

The unit is clearly a domestic appliance. It also contains a number of electro-mechanical features including a bean grinder, pump, and a gearbox of some kind. Both of the relevant classifications are in Chapter 85. According to the Explanatory Notes to 8509, machines of that heading are to be classified based on their principal function, even if there are two or more complementary functions. The Explanatory Notes to Heading 8516 list electro-thermic machines including coffee makers as included in that Heading.

Philips argued that the espresso machines are both electro-mechanical and electro-thermic. As such, they are prima facie classifiable in both headings. From there, Philips argued that the espresso machines are not just coffee makers and are more specifically described as electro-mechanical appliances because their principal function is making espresso, not coffee. (If you just said, "What's the difference?" you need to spend more time and money on your coffee products.) Philips also made an essential character argument that the grinder and pump are what provide the essential character to this appliance and differentiate it from a simple Mr. Coffee.

CBSA, as you might imagine, had a different view. It argued that heating the water was the principal function, making these machines fall within Heading 8516 as electro-thermic appliances. In the alternative, CBSA argued that the essential character is imparted by the electro-thermic components of the composite machine.

What to do? First, go get yourself a cup of Joe.

The problem here is that the espresso machine is a functional unit or composite good but it is also a finished thing. This is not a situation where some mad genius of marketing as created a chimera of two largely unrelated things like my dream of a microwave corn popper that is also a streaming media player. This is different. It is an espresso machine that includes a pump and grinder as part of its design to fulfill its purpose of making espresso. According to the Explanatory Notes to Section XVI, that is a case where the classification of the composite good or functional unit does not depend on essential character. If it did, the absurd result might be classifying a complete item as one of several competing components even though there is a perfectly good heading for the complete item. That should be avoided.

According to the CITT, espresso is defined as coffee made by forcing steam through ground coffee beans and as strong, concentrated coffee. Even the business documents Philips produced refer to the quality of the coffee the machine can produce. Based on this and oral testimony, the Tribunal found that espresso is a form of coffee. That means that the machines at issue can make coffee. The fact that a typical coffee machine cannot produce espresso, did not save the day for Philips.

Thus, these machines, which make espresso, are classifiable as coffee makers. Let the hipster waling begin.

Saturday, October 04, 2014

To the realm of cooking tools I never knew I needed, add "Grilling Claws."

Apparently, this is the proper way to shred barbecued meat. I don't know how I have gotten along this far in life without a set.

And, if I were importing these particular grilling claws, the tariff classification would be 7323.99.9030, Harmonized Tariff Schedule of the United States (HTSUS), which provides for…kitchen…articles…of…steel…: other: other: not coated or plated with precious metal: other: other…kitchen or tableware suitable for food or drink contact. The rate of duty will be 3.4 percent ad valorem.

Friday, October 03, 2014

I am doing this quick. It is, for me, a Holiday today and I am behind on blog posts. Happy New Year to those of you celebrating.

Streetsurfing LLC v. United States is a classification case from the U.S. Court of International Trade that revolves around one of my favorite topics: what is sports equipment as opposed to a toy, apparel, or some other general use product? In this case, the product is a sort of high-tech skateboard-ish gizmo called a casterboard. The traditional solid deck is split, creating two independently moving platforms connected by a joint. By opposing pressure on the front and back platforms, the thing moves the rider along, including uphill.

Here's a video that makes it pretty clear what we are talking about.

With that in mind, here is the bottom line question: Is that a wheeled toy (9503.00.00, duty free) or is it sporting goods for general physical exercise (9506.99.60, 4%)?

The starting point here is noticing that 9503.00.00 is a principal use provision requiring that the article be used for amusement, although some physical exertion may be required. On the other hand, 9506.99.60, is a residual provision. That means that 9503 is the more specific heading and, if the product can be classified in both headings, 9503 will prevail. That means, the first question is whether the product is a toy that can be classified in 9503.

In addition to being for amusement, the Court of International Trade held that wheeled toys have other common characteristics including:

No need for training

Absence of meaningful risk of injury

Lack of acquired skill to fully use the item

Lack of exercise or athletic aspects to the item's use

The presence of some device to assist in the use of the item (e.g., handlebars)

The Streetsurfing boards failed each of these tests. Thus, they are not toys. Thus, there is no conflict between 9503 and 9506.

To be sporting equipment, the product must meet another set of criteria. Most important, there must be a meaningful degree of healthy, challenging, and skillful recreation involve. There need not be organized competitions, rules, or scoring for the article to be sporting equipment.

Here, the Court found that the Streetsurfing boards possess the qualities necessary to be classified as sports equipment. Thus, the Court upheld Customs and Border Protection's classification in 9506.99.60.